Ten Commandments Of Smart Philanthropy

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Recent decades have seen incredible growth in independent philanthropy. In the past 10 years, the number of donor-advised funds has multiplied fourfold; the number of foundations has grown five-fold in the last 20.

But, despite the amazing achievements of independent philanthropy, there are many problems with the way funders do their giving. While some funders are literally changing the world, most, sadly, are underperforming. And many still haven’t internalized the responsibilities that come with their newly acquired leadership place in the Jewish world.

It’s a shame, because underperforming in philanthropy is not just a waste of money, it’s a betrayal of our own legacy. Our community has a rich history of taking care of and investing in itself, and when we funders fall short, the consequences can be dire. So even as we experience the rise of deeply personal philanthropy, we need to be ever more strategic and smart about it.

So what should be the new Decalogue of a more effective Jewish philanthropy?

1 – Be strategic: a smart philanthropic strategy starts by defining the societal value that it seeks to enhance. What problems are we trying to solve? Where are we focused? What are our goals? These questions need to be asked, and answered, before any checks are written.

2 – Think long. How many problems in our society are “one year” problems? Are education, health care, climate change, or Jewish continuity short-term issues? So why do funders insist on one-year grants? And where in the Torah is written that three years is “long-term funding?” Smart funders link the duration of their grants to the lifecycle of the program they are funding, and don’t commit enough to bring an idea to scale.

3 – Self-sufficiency is a myth. Nonprofits are not meant to be self-sufficient. If “the market” could take care of education equality, it would have done so through the magic of the invisible hand. Where nonprofits are needed is precisely on the issues where the market doesn’t deliver. While it can be laudable for nonprofits to develop alternative revenue streams and innovative funding models, the unrealistic expectation of self-sufficiency is self-defeating. Smart funders should, instead, work toward long-term sustainability.

4 – Fund at the right level. We systematically underestimate and under-invest. Many of the problems we need to solve are complex and difficult, and may even be ultimately intractable. These big needs demand more resources than we are ready to allocate, and nonprofits, facing a “this or nothing” dilemma end up accepting (or requesting) grants that are insufficient. Our limited funding contributes to what has been called the “non-profit starvation cycle.”

5 – Fund (good) overhead and capacity building. Probably one of the most harmful fixations of funders is with the so-called “overhead.” No one checks an airline’s overhead before buying a ticket; you actually hope that it’s high and they aren’t saving on pilot training or eliminating redundant controls. I don’t care about my favorite Brooklyn coffee shop’s overhead either; the coffee is good, the price is reasonable, and that’s all I need to know. Only when it comes to philanthropy do we obsess about overhead. While there have been some abuses and some organizations are unnecessarily bloated, overhead — or operational costs — is what allows an organization to work with proper tools; to have good and trained professionals; to have contingency plans for emergencies, etc. “Good” overhead is not useless administrative circuits. Rather, it’s what allows an organization to function.

6 – Measure the right things. Intelligent measurements don’t abound. Mostly, funders measure what they can, not what they should. Measuring long-term impact is critical. Instead of measuring inputs or outputs, we should measure impact over the long term. And most importantly, certain things are immeasurable. Should we cease pursuing happiness because we can’t measure it?

7 – Balance restricted and unrestricted gifts. Many donors give restricted gifts because they don’t have sufficient trust that the organization will use the funds properly. If you don’t trust an organization, don’t give them anything. But if you do, fund them in a way that allows them to fulfill their core mission. Allocating funds to a specific program is important and necessary at times, but we also need to understand that organizations need unrestricted money to operate and build their capacity.

8 – Be part of the community. The idea of community is central to the Jewish People. Our central communal organizations — and Federations specifically — embody our idea of collective responsibility and solidarity. Independent philanthropists must not see themselves as an alternative to communal structures. These organizations maintain the basic safety net that makes more strategic philanthropy possible. Supporting the local Federation, JCC, etc. is not merely an act of ”good corporate citizenship,” it’s what allows independent philanthropy to exist.

9 – Don’t go it alone. Smart funders are networked: they work in partnership, share information and collaborate with others. The problems we face in the Jewish community and the world are too difficult to be tackled alone. Organizations and individuals that succeed in the 21st century are those that create fluid and flexible networks with diversity and leverage. Today, you bring value based on the number and quality of your connections, not just the size of your wallet.

10 – Have a balanced portfolio. The same level of care that goes into creating an investment portfolio should go into devising a good philanthropic portfolio: risk, social pressures and obligations, and the mission of the foundation all need to be balanced. And like investing, we need to be sure we’re using the right philanthropic vehicle; the secular world is experimenting with many new tools to do philanthropy: impact investing; venture philanthropy; giving circles; etc. We need to try these, and more.

To be an effective philanthropist one has to be, first and foremost, a relentless question asker: about the state of the world, about our mission and goals, about our strategies and tactics, about our grantees and partners. But most importantly, we need to always question our own effectiveness. We need to ask ourselves: what can we do to better deliver on the promise that philanthropy offers the Jewish world?